# Treaty Investor Risk Analysis This is the risk analysis for the **[1% Treaty](https://manual.warondisease.org/knowledge/solution/1-percent-treaty.html)^([1](../references.llms.md#ref-1-percent-treaty-paper-2025)) ^([2](../references.llms.md#ref-1-pct-treaty-impact-paper-2025)) campaign** and its instruments, VICTORY [Incentive Alignment Bonds](../../knowledge/solution/incentive-alignment-bonds.llms.md)^([3](../references.llms.md#ref-iab-paper-2025)) and Prize deposits. It is a separate product from buying [Earth Optimization Services](../../knowledge/solution/earth-optimization-services.llms.md) shares. For the risk profile of the EOS equity raise, see the [Earth Optimization Fund](../../knowledge/economics/earth-optimization-fund.llms.md). Your investors will ask: “Is this riskier than a normal startup investment?” It is not riskier. It is a different risk. A normal startup bets that a stranger will want its app. This bets that a politician will stop buying a bomb. Your species has decided the second one is the weird option. ## Where the risk lives. [![Venture capital: risk money on inventing something new. Political arbitrage: risk money on convincing politicians to stop buying bombs. One of these is considered the risky option.](../../assets/images/treaty-investor-risk-analysis/treaty-investor-risk-analysis-section-1-the-core-thesis-political-arbitrage-vs-venture-capital-bw-academic.jpg)](../../assets/images/treaty-investor-risk-analysis/treaty-investor-risk-analysis-section-1-the-core-thesis-political-arbitrage-vs-venture-capital-bw-academic.jpg) Venture capital: risk money on inventing something new. Political arbitrage: risk money on convincing politicians to stop buying bombs. One of these is considered the risky option. **Normal VC risk:** Will customers want this product? Will the market adopt it? Can the company find product-market fit before the money runs out? Most startups fail here. The entire model bets on **creating a new cash flow from scratch.** **Your risk:** Will your [1% Treaty](https://manual.warondisease.org/knowledge/solution/1-percent-treaty.html)^([1](../references.llms.md#ref-1-percent-treaty-paper-2025)) ^([2](../references.llms.md#ref-1-pct-treaty-impact-paper-2025)) get ratified? That’s it. You’re not creating a new market. You’re **redirecting a pre-existing cash flow** ([\$2.72 trillion](../../knowledge/appendix/parameters-and-calculations.llms.md#sec-global_military_spending_annual_2024) in annual military spending^([4](../references.llms.md#ref-sipri2024))). The “market” already exists. It’s fully capitalized. Your species is already spending the money. You’re just changing what it buys. **Your payback:** Returns don’t depend on product-market fit, user adoption, or competitive dynamics. They depend on treaty ratification. That unlocks direct, recurring government payments. **The precedent:** Your military-industrial complex has proven this model for decades. Over the twenty years of the Afghan War, its top five firms spent ~\$1.1 billion on lobbying and collected \$2.02 trillion in contracts^([5](../references.llms.md#ref-lobbying-roi-calc)). That’s an ROI of 1,813:1. You’re just reversing the cash flow. ## Risk Comparison | Risk Factor | Normal VC | Your VICTORY [Incentive Alignment Bonds](../../knowledge/solution/incentive-alignment-bonds.llms.md) | |:---|:---|:---| | **Market Risk** | **VERY HIGH** (primary killer) | **VERY LOW** (the [\$2.72 trillion](../../knowledge/appendix/parameters-and-calculations.llms.md#sec-global_military_spending_annual_2024) “market” already exists) | | **Competition Risk** | **HIGH** (must beat incumbents) | **LOW** (you co-opt competitors, not fight them) | | **Execution Risk** | **MEDIUM-HIGH** (build and scale a company) | **HIGH** (global legal and technical coordination) | | **Political Risk** | **LOW** (operates within existing rules) | **VERY HIGH** (this is the whole bet) | | **Outcome Profile** | Graded (fail, 2x, 100x) | Binary (near-total loss, or a [272%](../../knowledge/appendix/parameters-and-calculations.llms.md#sec-victory_bond_annual_return_pct)/year perpetual win) | You’ve swapped market and competition risk for one concentrated political risk. On your planet this is considered exotic, which is strange, because you have traded fifty things that can go wrong for one. You normally call having fewer problems an improvement. [![Trade the risk of business failure for the risk of political failure. Like choosing between quicksand and a trapdoor.](../../assets/images/treaty-investor-risk-analysis/treaty-investor-risk-analysis-section-comparative-risk-analysis-bw-academic.jpg)](../../assets/images/treaty-investor-risk-analysis/treaty-investor-risk-analysis-section-comparative-risk-analysis-bw-academic.jpg) Trade the risk of business failure for the risk of political failure. Like choosing between quicksand and a trapdoor. ## How You Mitigate Each Risk Your ecosystem has two instruments with two risk profiles. A **Prize deposit** is a claim on the prize pool: if the plan fails to hit its year 15 targets (global HALE [79.4 years (90% CI: 70.2 years-90.7 years)](../../knowledge/appendix/parameters-and-calculations.llms.md#sec-prize_target_hale_year_15), median income [\$4,381 (90% CI: \$3,292-\$5,411)](../../knowledge/appendix/parameters-and-calculations.llms.md#sec-prize_target_median_income_year_15)), depositors divide the realized pool pro rata by deposits; if it succeeds, the same pool routes to Earth Optimization Points holders. **[IABs](../../knowledge/solution/incentive-alignment-bonds.llms.md)^([3](../references.llms.md#ref-iab-paper-2025))** fund the lobbying campaign with real capital at risk. ### Two Ways to Express Your Belief (Without a Vote Market) The two-instrument design lets people on both sides of the bet participate, without ever creating a tradeable market in votes: | Belief about treaty success | Rational action | Why | |:---|:---|:---| | **Likely to succeed** | Recruit voters and earn Earth Optimization Points | Points pay out of the pool on success. Higher probability = higher expected value. | | **Likely to fail** | Make a Prize deposit | On failure, depositors divide the realized pool pro rata. Your downside is protected whether or not the treaty passes. | The mix of deposits and recruitment activity is a coarse public signal of how the crowd reads the odds. But note what it is not: there is no tradeable token and no secondary-market price, by design. Earth Optimization Points are earned, never bought, and cannot be sold; deposits are redeemed, not traded. We deliberately did not build a market where votes or coalition membership can be priced and purchased, because a market in votes is a market in influence. The signal is coarser than a live prediction market would be. That is the cost of keeping money and votes on separate tables, and it is worth paying. This also means every participant is hedged. Depositors keep the failure-branch claim on the pool, while recruiters are financially better off if the treaty succeeds. Both still contribute to the referendum and coalition-building either way. Your species calls this “mechanism design.” It is just making sure everyone has a reason to show up regardless of their priors. Two additional mechanisms mitigate IAB-specific risk: ### Prediction Markets & Dynamic Pricing (Political Risk) [![A website where people bet on whether politicians will do the right thing. The worse the odds get, the more you pay investors to keep hoping. It’s like a sadness meter for democracy.](../../assets/images/treaty-investor-risk-analysis/treaty-investor-risk-analysis-section-b-metaculus-dynamic-pricing-mitigates-political-risk-bw-academic.jpg)](../../assets/images/treaty-investor-risk-analysis/treaty-investor-risk-analysis-section-b-metaculus-dynamic-pricing-mitigates-political-risk-bw-academic.jpg) A website where people bet on whether politicians will do the right thing. The worse the odds get, the more you pay investors to keep hoping. It’s like a sadness meter for democracy. **Problem:** Political risk is hard to quantify. Your species has been guessing about it since democracy was invented. **Solution:** Use a public prediction market (like Metaculus) to track the probability of treaty success in real time. This prices your bond yields on the fly. High perceived risk? Higher yield. Low risk? Lower yield. Your investors always get a **fair premium for the political risk they’re taking.** No guessing. Just math. ### Front-Loaded Payouts (Timeline Risk) **Problem:** Your political processes are slow. Investors don’t want money locked up for a decade while politicians deliberate. **Solution:** Payouts are front-loaded. In the first year of treaty inflows, the model pays out a multiple of the initial investment (e.g., 2.6x in the partial success scenario). This shortens risk exposure from a decade to a few years. See the [Cash Flow Model](../../knowledge/economics/treaty-financial-plan.llms.md) for details. [![Pay investors early so they stop worrying early. Turns out the main risk in saving the world is having to think about it for ten years.](../../assets/images/treaty-investor-risk-analysis/treaty-investor-risk-analysis-section-c-front-loaded-payouts-mitigates-timeline-risk-bw-academic.jpg)](../../assets/images/treaty-investor-risk-analysis/treaty-investor-risk-analysis-section-c-front-loaded-payouts-mitigates-timeline-risk-bw-academic.jpg) Pay investors early so they stop worrying early. Turns out the main risk in saving the world is having to think about it for ten years. ## Conclusion: Is This Less Risky Than VC? [![Venture capital: 50 things can go wrong. Political arbitrage: one thing can go wrong, but that thing is democracy.](../../assets/images/treaty-investor-risk-analysis/treaty-investor-risk-analysis-section-conclusion-is-it-less-risky-than-a-vc-investment-bw-academic.jpg)](../../assets/images/treaty-investor-risk-analysis/treaty-investor-risk-analysis-section-conclusion-is-it-less-risky-than-a-vc-investment-bw-academic.jpg) Venture capital: 50 things can go wrong. Political arbitrage: one thing can go wrong, but that thing is democracy. On a risk-adjusted expected value basis? **Yes.** A typical VC portfolio bets on a chaotic sea of variables: market, team, product, competition. Your [VICTORY Incentive Alignment Bonds](../../knowledge/solution/incentive-alignment-bonds.llms.md)^([3](../references.llms.md#ref-iab-paper-2025)) bet on one variable (political will). They come with three safety nets and transparent pricing. One variable. Three safety nets. Cleaner bet. Clearer path. And if you win, you also save millions of lives. Your species has a word for investments that are both profitable and moral. You call them “rare.” Time to make them common. 1\. Sinn, M. P. *The 1% Treaty*. (2025) doi:[10.5281/zenodo.20076511](https://doi.org/10.5281/zenodo.20076511) *Your governments possess nuclear weapons sufficient to end civilization 122 times but have not cured Alzheimer’s once. This treaty asks them to be 1% more rational.* 2\. Sinn, M. P. *The 1% Treaty: An Incentive-Compatible Approach to Ending War and Disease*. (2025) doi:[10.5281/zenodo.18161560](https://doi.org/10.5281/zenodo.18161560) *6,650 diseases have zero FDA-approved treatments; at current trial capacity, exploring them takes  443 years. Redirecting 1% of military spending scales capacity 12.3x, cutting the timeline to  36 years and preventing 10.7 billion deaths. At \$0.02/DALY, 9.3kx more cost-effective than the best existing interventions. The result holds across every specified adoption pathway.* 3\. Sinn, M. P. *Incentive Alignment Bonds: Making Public Goods Financially and Politically Profitable*. (2025) doi:[10.5281/zenodo.18203221](https://doi.org/10.5281/zenodo.18203221) *Government spending is optimized for lobbying intensity, not net societal value. Programs with 100:1 benefit-cost ratios get billions while programs with negative returns get hundreds of billions. Incentive Alignment Bonds flip this by creating a capital pool that rewards politicians (via campaign support and post-office opportunities) for funding high-NSV programs over low-NSV alternatives. The result: public good becomes private profit for both investors and elected officials.* 4\. Stockholm International Peace Research Institute. [Trends in world military expenditure, 2023](https://www.sipri.org/publications/2024/sipri-fact-sheets/trends-world-military-expenditure-2023). (2024). 5\. Responsible Statecraft. Lobbying ROI calculation (\$1,813 per \$1). *Responsible Statecraft* (2021). 6\. SIPRI. Global military spending (\$2.72T, 2024). *SIPRI* (2025).